ByteDance, the Chinese owner behind TikTok, has set aside a capital expenditure of over 150 billion yuan, that is around $20.64 billion, for capital expenditure in the current year, according to a Reuters report. Moreover, the company plans to spend around half of this amount internationally on AI-related infrastructure, primarily targeting data centers and networking equipment.
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ByteDance’s Capex Fuels Key Chipmaker Partnerships
ByteDance’s investment strategy involves key strategic partnerships with prominent chipmakers including Huawei Technologies, Cambricon Technologies, and U.S. supplier Nvidia (NVDA). This capex could help ByteDance retain its lead in the AI space in China as the company currently has 15 standalone AI applications in China.
In fact, the company is currently the largest buyer of Nvidia’s H20 AI chips, which were specifically designed for the Chinese market in response to complex export restrictions. Furthermore, ByteDance is Microsoft’s (MSFT) most significant client in Asia for Nvidia chips required for cloud-computing.
ByteDance’s substantial capex could benefit NVDA, especially as China is an important market for the chipmaker.
China Is an Important Market for NVDA
China remains a strategically important market for NVDA. In fact, in the most recent quarter, China represented more than 15% of the company’s total revenues, generating $5.2 billion in sales—a 34% year-over-year increase. Furthermore, on a recent visit to China, the company’s CEO Jensen Huang stated that over 1.5 million developers use the company’s proprietary computing platform, CUDA, and the company has collaborated with over 3,000 startups to bolster the local tech ecosystem.
What Is the Prediction for NVDA Stock?
Analysts remain bullish about NVDA stock, with a Strong Buy consensus rating based on 36 Buys and three Holds. Over the past year, NVDA has surged by more than 100%, and the average NVDA price target of $176.86 implies an upside potential of 21.8% from current levels.
